EUR/USD Forecast: Seems vulnerable below 1.1800 mark ahead of ECB on Thursday

The EUR/USD pair added to the previous day's modest losses and witnessed some follow-through selling on Tuesday. The downtick marked the sixth consecutive day of a negative move and was sponsored by a strong pickup in the US dollar demand. As traders returned after the US Labor Day holiday, the greenback drove some haven flows amid a rout in the equity markets. Against the backdrop of increasing risk of a no-deal Brexit, the global risk sentiment further took a hit after AstraZeneca delayed testing of a coronavirus vaccine.

On the other hand, the shared currency remained depressed on the back of the ECB's concerns over the exchange rate level and seemed rather unimpressed by an upward revision of the Eurozone GDP. The Eurostat reported that the economy contracted by -11.8% during the second quarter of 2020, less-than -12.1% estimated previously. Nevertheless, the pair prolonged its recent pullback from 28-month tops – levels beyond the key 1.2000 psychological mark – and dropped to near three-week lows during the Asian session on Wednesday.

Meanwhile, the downside seems limited, at least for the time being, as investors might refrain from placing any aggressive bets ahead of the ECB monetary policy update on Thursday. Heading into the key event risk, the pair is more likely to remain confined in a range in absence of any major market-moving economic releases, either from the Eurozone or the US.

Short-term technical outlook

From a technical perspective, the overnight sustained weakness below the 1.1800 mark might have confirmed a near-term bearish breakthrough a one-month-old ascending channel. That said, bears might still wait for some follow-through selling below mid-1.1700s before placing fresh bets. The pair might then accelerate the slide towards the 1.1700 round-figure mark. The latter coincides with August monthly swing lows, below which the pair seems all set to extend the ongoing corrective slide.

On the flip side, the channel support breakpoint, around the 1.1800-1.1815 region, now seems to act as immediate resistance. Any subsequent positive move is likely to confront a stiff resistance and remain capped near the 1.1850-60 horizontal zone. A sustained strength beyond might trigger a short-covering move and push the pair back above the 1.1900 mark, towards the 1.1935-40 supply zone.